Kongregate Arcade’s rejection from the Android Market just got more interesting now that Google has explained itself.

Earlier this week, Flash gaming portal Kongregate released an Android app that’s basically an extension of the full website. Kongregate Arcade provided recommendations and user reviews for more than 300 phone-friendly Flash games, along with badges for in-game achievements.

It also allowed users to cache Flash games for offline play. And that, apparently, is what upset Google enough to remove the app. (You can still get it from Kongregate’s website.) The Android Market does not allow developers to distribute their own app stores, and offline caching led Google to view Kongregate Arcade as a self-contained app storefront.

But in explaining its logic to GigaOM, Google has exposed both a double standard for video games and an instance where Apple, oddly enough, is more liberal.

Before this incident, I never noticed that the Android Market doesn’t have any legitimate emulation apps. Sure, there are scads of emulators like Nesoid and Frodo C64, but you’ve got to supply your own ROMs to play games. On the iPhone, there’s Manomio’s C64, VH1 Classic’s Intellivision, Elite’s ZX Spectrum collection and the just-relaunched iDOS. All of them have in-app stores for legally downloading games. I don’t know whether Google has explicitly banned these kinds of apps, or whether the developers simply aren’t interested, but it’s kind of odd that the apps Google allows are the ones most likely to infringe copyrights.

Anyway, the ban on in-app download stores isn’t consistent in the Android Market. Amazon’s Kindle for Android added in-app purchases last month, and a hallmark of music apps such as MOG and Rdio is their ability to store music locally for offline listening. I understand that video games are technically software applications rather than media files, but in practice Kongregate’s Flash game library is no different than collection of books or a song. And besides, Kongregate is giving its games away.

Kongregate’s only shot at the Android Market may be to release the app without offline play, but I really hope that doesn’t happen. Google ought to be celebrating this app, which not only lifts up Android as a gaming platform but does so with Flash, supposedly a big advantage for Android over the iPhone. The developers’ terms in play here are convoluted enough for Google to make an exception.